Revvity, Inc.

All right. Good morning. Thanks, everybody, for joining us. Welcome to the Wells Fargo Healthcare Conference. I'm Brandon Couliard. I cover the life science tools and diagnostic space here at the firm. Thrilled to have Revity back with us at the opening presentation this year and joining us from the company, CFO Max Krakow.

Max, thanks for being here.

Maybe to kick things off, just starting with 2Q results, it seemed like the quarter was Generally in line as you expected. Outlook came down a little bit, mostly on China diagnostics. Maybe just walk us through the quarter, how it played out relative to expectations, some of the key takeaways from your view.

Yeah, sure. I think when we look at the second quarter performance, as you mentioned, it was roughly in line with expectations. I think things played out as anticipated. So from a growth perspective, we finished with 3% organic growth. Life sciences was slightly above that in the mid-single-digit range, and diagnostics was in the low single-digit range. I think when you look at the business's performance on the life sciences side, you know, software continued to perform extremely well and excited to talk about that business a little bit further today. And then we continue to see sequential growth in our reagents business. And so we've got real, some good momentum in that business. Things aren't still back to normal, but we continue to see that sequential growth. I think when you look on the diagnostic side, as you mentioned, you know, China was a headwind, but we were able to offset that with the growth outside of China. And so kind of came in at a global level in line with our expectations.

Sticking with just China Diagnostics, that was, I think, the biggest delta in the quarter, biggest surprise. You brought down the outlook for the back half tied to that in-market. First it was VBP. Now it's kind of DRG. You can just walk us through what's going on there, what's changed, why they seem to be focusing on your multiplex DX panels, and why do you think there isn't kind of more to go?

Yeah, sure. I think when you look in diagnostics in China, obviously there's a big focus on just reducing overall health care costs, and sometimes it's even at the expense of the patient care. And I think what you're seeing with DRG is it's basically a change in the reimbursement where instead of hospitals getting reimbursed for sort of single patient service orders, you're grouping patients into cohorts and getting reimbursed on just the general care for that patient population. And so what that leads to is less multi-plus techs, smaller panel sizes, more single-plus techs, because those are at a lower cost. And so basically then what happened in April is China came out with the de-bundling policy. And basically this really forced the hospital's hands of reducing the number of multi-plus techs. And you got a lot more single-plus techs, which for us, about two-thirds of our revenue in China is the multiplex panels. And so for us, that was a significant headwind. You know, the business in China was down about 15% in the second quarter. Our guidance for the back half now has the China business down mid-20s, and so we'll really kind of see that first full quarter impact in the third quarter. It'll probably take us a full calendar year to lap it, so if you think about it, kind of getting that full annualized baseline, you know, at some point in April 2026, and then we'll look to grow off that.

So just to remind us how big the China DX business is for you, just in terms of general exposure. And you did say, I think, two-thirds is the immuno DX piece, right?

Yeah. Overall, China for us is about 15%, 16% of revenue. And then China DX is about 9% of total company revenue for us.

OK. Maybe just switching gears quickly, it'd be helpful to get an update on tariffs, what you're doing in terms of mitigation efforts, what's embedded in the guide this year in terms of net impact? How do we think about that in 26?

Yeah, so I think when you look at, let's start maybe with 2025 first. So the net impact for a tariff for us that's embedded in guidance is about a 12 cent headwind or about a 50 bps headwind to our operating margins. I think when you look at it from a geopolitical or a geography perspective, for us, most of that net impact is really Europe. The China tariffs we've already kind of operationally mitigated in terms of what was previously sent over from the U.S. with local manufacturing. And then we've got the rest really that goes into China is from Europe. And so that's not impacted from the tariffs. and then we don't export anything out of China. So for us, China is not really an impact for us from a tariff perspective. Really the net impact is Europe into the U.S., and that's predominantly diagnostics manufacturing. And so when we look at sort of the mitigating actions, there's a lot to consider when looking at basically putting in a new FDA site in the U.S. and the cost there and the regulatory requirements. And so it's something we're kind of continuing to evaluate here. But really the net impact for us is that Europe manufacturing into the U.S. for a diagnostics business.

Digging into the life sciences business, pharma was up mid-single digits in 2Q. It seems like you're benefiting mostly from the signals business. Can you kind of parse that out in terms of how much is kind of the base life science business, how much is the signal software? You mentioned you've seen some good stability in reagents. Kind of just unpack the pharma picture for us.

Yeah. So as you mentioned, pharma was up mid-single digits in the second quarter. A lot of that was due to the strength in the signals business. So signals grew a little north of 30% in the period. The other piece that we sell into pharma is our life sciences solutions business, which is our reagents and our instrumentation. And I think when you look at the performance of the reagents and instrumentation, Overall, it was slightly down in the quarter, but then obviously the reagents had continued growth while the instrumentation was really what was pressured from a growth rate perspective.

Where's the signals growth coming from? Where is market kind of what's behind that 30% growth? And maybe just talk about sustainability.

Yeah, I think we remain incredibly excited about the sustainability of our software performance. Organic growth is a little bit finicky with software businesses, but we like to look at more, I would say, the operational metrics and underlying performance of the business. So some of those metrics in the second quarter, we look at something called APV, which is your annualized portfolio value, which really sort of normalizes for some of the RevRec nuances in software. Our APV in the second quarter was low teens growth year over year. We also look at our ARR growth as we continue to push the transition to SaaS, and that was growing up north of 40% in the quarter. And the third metric we like to look at is the net retention rate. In the second quarter, that was 115%, which is a really strong quarter for us, and I think a testament to the stickiness we have with our customers. And I think as you really look at the sustainability and where this goes from here, I'd say a couple different things. One is that we are in the midst of a, I would say, significant MPI launch for that business. So we had recently come out with two products that moved us a little bit further downstream into some of the clinical software offerings. And then as you look in the future, you know, we're going to come out with a large molecule workflow offering. We're already embedded on the small molecule side, so we're launching the large molecule side. And then, you know, I think even outside of the MPIs, you can also look at the just growing of our customer base, whether that's moving further downstream in pharma, as we predominantly sell to the Tier 1 pharma companies today, so moving down further into Tier 2, Tier 3. And then secondly, you know, expanding outside of pharma and really looking at material science where we've had some real, I would say, meaningful wins over the past 12 months, and we expect that tailwinds to continue in the coming years.

Staying within pharma, obviously, tariffs, MFN, top of mind for investors. How much are you hearing from customers in terms of concerns there? Do you think it's holding back spending? Just what are you hearing from the ground on those two issues?

I would say just general cautiousness, which has been kind of a consistent trend over the past couple months. And I think until we get some real clarity on policies and allowing the pharma companies to really plan out the next couple of years and how they're going to invest pre-clinically, I think you're going to continue to see that real sort of cautious sentiment from them.

Maybe shifting gears to A&G, that's about, I think, a quarter of your life science business. I think people were pretty surprised at kind of how well that's held up with kind of a few exceptions. I think it was down low singles for you in the second quarter, so hardly a disaster. So just what are you seeing geographically for A&G? I think the U.S. A&G market is maybe 5% of your revenue base, somewhere in there in terms of exposure. And as you kind of look at the back half of the year, Have you assumed it gets worse? Kind of what is embedded in your outlook for that market?

Yeah, so I would say from an academic and government perspective, at least maybe I'll clear the deck on what's embedded in the second half. We're assuming basically the same market environment that we've faced here in the second quarter. So no significant improvement, no significant deceleration. And I think when you really look at A&G for us, it's important to remember, too, what we sell in the academic and government, more than 75% of it is our reagents business. And so from that perspective, we're a little bit, I would say, more insulated from some of the budgetary pressures as it really seems to be impacting the instrumentation, which is where we're seeing it. I think when you look at the performance of the reagents business, you know, it was closer to flat to slightly up. And it's pretty balanced, I would say, geographically. There wasn't one that I would say that I would spike out versus another.

So within A&G, reagents was kind of flat to up in the second quarter? Mm-hmm. And so the outlook for the back half assumes that A&G and markets... down low singles similar to 2q i mean we don't guide by end market but yeah i would envision a similar environment where reagents will be you know flattest to slightly up and then the instrumentation is going to be pressured okay fair enough um maybe um shifting gears over to china we talked about uh diagnostics um but within life sciences um Looking across the industry, it feels like the environment's stable generally. Some companies have seen some stimulus benefit. Others have talked about a delay on stimulus monies. Has gravity seen any benefit from stimulus? What's your general take of the macro picture there? What's the state of the union from life sciences and market in China?

I think from a macro perspective, we continue to see China very focused on, I would say, innovative science and the life sciences side of things. And we're, I think, seeing the benefit of that because it really plays into what we do from an offering perspective and really be focused on, I would say, special areas of science. And so if you look at our China business, I think we grew mid-single digits in the second quarter for life sciences in China. Reagents was a little bit north of that, and then instrumentation still grew, but at a more modest pace. And I think as we look at the second half, I think we expect that trend to continue where our sort of reagents and specialty areas of life sciences will continue to see growth and instrumentations will be, you know, growing but not significantly as we're not really seeing that huge bump from stimulus nor are we anticipating to.

You have talked about, I think, the reagents business generally being up sequentially, I think, for six straight quarters now, right? Which is encouraging. Where are you seeing, I guess, the most demand for those products? What gets you back to kind of your LRP target for that business of what I think was kind of 9% to 11% growth over time? How do we get back to what are the conditions that get you to that level of growth again?

Yeah, I think maybe I'll start just in terms of how the business is performing overall right now. I think I mentioned pharma is probably growing faster from a reagent perspective than academic and government, which is where we continue to see strength in pharma, or improvement, I should say. I think then when you look at it geographically, I mentioned China is definitely the fastest growing region right now from a reagent's perspective. The U.S. and Europe are still growing, just not at the same rate as China, and I think that'll be, again, a similar trend that we see throughout the this year. I think when you look at it in terms of how do we get back to sort of our LRP, I would say our normalized growth rate from a reagent standpoint, it really is needing to see that, I would say, clarity on the policy and allowing pharma and academic and government from a regulatory perspective to just understand What are the rules of the game? How can we plan out the next couple of years? Where can we invest? And until that happens, I really think you're just going to continue to see a level of cautiousness even on the reagent side. I'd say the one area outside of maybe some of the macro factors that we remain incredibly excited about is on GMP. So we've had our GMP facility up and running for about a year now. We do expect it to take some time for us to really ramp up and build momentum with our customers, but we're seeing some really good early wins and it's something that we remain confident over the next handful of years that we're going to see some real benefit from.

Any changes in the competitive landscape do you think you're benefiting from One of the key competitors in that market, AppCamp, being consolidated. They've been changing a lot of, I think, commercial activity at AppCamp under the Danaher umbrella. They're adjusting pricing, doing all kinds of things. They've missed their year one numbers by a lot. Do you think that's benefiting your reagents business?

Yeah, look, I think when we look at our reagents performance versus the competitors over the past couple of years, we believe that we've been outperforming the peers in the reagents business. So I'm assuming some part of that is taking share. Exactly who that's coming from is always a tough game to tell. But look, I think that we believe that we have some real competitive advantages in our reagents business in terms of our customer service, our product quality, how we go to market. And so I think that's something that we believe will continue to be I differentiate it for us as Revit.

I do want to touch on instruments, which were down mid to high single digits in the second quarter. You kind of just touch on, are there any, you know, pockets of strength in there? It's kind of a different mix of instruments. I think you kind of benchmark it compared to other peers. Maybe it's not totally fair to benchmark your instrument's business versus, you know, Agilent thermal waters per se but What's this? What have you assumed in kind of the outlook and when does this business kind of stabilize from your point of view?

Yeah, I think in terms of at least the the current performance. I would say there is a little bit probably a difference On some of our underneath product lines, you know The lower ASP instruments are having a little bit more momentum particularly around cell counting or even the extraction RNA DNA equipment some parts of liquid handling. And so that is doing a little bit, I would say, better for us. The higher ASP instruments, imaging and the high content screening, obviously the bigger ticket items are having a little bit more headwinds right now just given the environment. And I think that's really what's going to sort of need to shake free in order for our instruments to start growing again is, again, just more certainty on what's happening from a policy perspective and allowing our customers to really plan ahead and start spending some money from a CapEx perspective.

The budget flush doesn't usually come up that often for Revit, but to what extent have you kind of assumed that you see a normal or above-average kind of budget flush in the fourth quarter this year from an instrument point of view?

Definitely not above average. I think it would be somewhat similar to what we saw last year, which was a more muted seasonality spike between the third and the fourth quarter.

I want to shift gears just lastly on the software business. How much pricing do you get in that segment? Do you think investors are giving you enough credit for the performance of that business?

I would say in terms of getting credit for the business, no. I don't think it's... It's receiving the credit it deserves. I think both Steve, Pallad, and myself, we try and talk about this business as much as we can because, look, a lot of our peers and competitors, they don't have this type of software business, so it's not as common in our space, and we really want to make sure folks understand the value that that business brings to us at Revity. And then I guess just tactically from your pricing question, Look, when we talk about the net retention rate, which usually hovers around, you know, 108, 109 percent, price is a component of that. Call it maybe, I don't know, 40 to 50 percent of that number, and the rest of it is, you know, upselling or adding on additional users.

Shifting gears over to diagnostics, starting with ImmunoDx, performed, you know, fairly well in the quarter. I think it was up low singles against the tough comp. Very strong growth in the Americas and Europe. If we kind of isolate China, which we talked about, what's driving the strength in those regions? I think America was up mid-teens. Europe was up maybe mid to high singles. Where's that coming from in what's called developed markets?

Yeah, I think it's a combination of factors. I think first, you know, the underlying market growth is strong. If you look at our immunodiagnostics, two-thirds of it is autoimmune globally. That autoimmune market is growing high single digits. And so for that one, you get some momentum just on the underlying market performance. I think, too, when you look at our innovation and product quality, that continues to be a differentiator for us versus our competitors. And then I'd say, thirdly, is really our continued commercial execution and really further penetration into areas like the Americas, where we are still, I would say, under-indexed versus the market.

Debt penetration story in the U.S. has been a theme for several years now, How big is the U.S. as a percent of the overall business? What does the menu expansion look like? And what's a good growth outlook just in the Americas for ImmunoDx, you know, call it next couple of years?

Yeah, I think if you look at our Americas penetration, you know, when we acquired ImmunoDx, both Euromune as well as even the Oxford business, they were heavily under-indexed in the U.S. versus the market average. I think if you look at our IDX business four or five years ago, less than 5% of the revenue came from the Americas. Now it's north of 15%. The business has been growing mid-teens plus over those four or five years. I think that's where we still have some room to continue growing at that rate for some time. The market is 40% in the Americas for autoimmune in these areas of immunodiagnostics where we play in. And we believe we should be closer to that number versus the 15% we are right now. And the key for us to get there, I would say, is really a combination of two things. One is continuing to get FDA approval on our menu. And then the second is continued focus on automation. In the U.S., automation is a much larger factor than other places in the world, just given the cost of labor. And so for us, that's something that we really needed to, I would say, improve our level of automation to be able to be competitive in the U.S. We've had two recent launches over the past 12 months in terms of higher automated instrumentation. We've got another one coming here in the next 12 to 18 months. Again, on the TB side of things, that'll be more high throughput focus. And so that's just an area that as long as we can execute and get the products to market, we believe that we'll have an ability to sort of reach more of that entitlement in the Americas. Who is your main competitor in that business in the Americas? Is it Bio-Rad? Bio-Rad's a big competitor. Thermo has an autoimmune business as well. I'd say those are probably the two biggest, and there are a couple other private companies, but those are two of the bigger ones.

I want to touch on reproductive health. I mean, that business is holding in. I think it was up low singles in the second quarter, led by high single-digit growth in newborn screening. Just to unpack what's driving the strength there, particularly in the context of what are falling birth rates globally.

Yeah, I think we remain incredibly enthusiastic about our reproductive health business, despite the fact that global birth rates have been a headwind for us. I think when you look at the growth algorithm of our newborn screening business, it's really three things. One, it's geographic expansion. So there's still 100 million babies born in the world that don't get any level of testing. Two is menu sort of adoption. So if you look across the globe, whether it's US states or different countries, they all test for different levels of indicators or markers in their panels today. And then the third one is, I would say, menu expansion, where we're continuing to bring new assays to market and find new areas to test for. Those are really, I would say, the three legs of the stool for the growth on newborn screening. I wouldn't say any one is more particularly heavy than the other. It's really the combination of those things that's driving that business. And, again, it's one that's grown mid-single digits plus over the past three years despite those birth rate headwinds.

Remind us what's assumed in your LRP for reproductive health.

Overall, reproductive health is 2-4%. When you look at the newborn screening, that one will be growing faster, so call that one 3-5%.

Gotcha. Maybe shifting gears, in terms of the guide for the year, so you're now calling for organic growth of, I think, 2-4%, which is now 100 bps from where you were pre-2Q. Again, driven by the China DRG impact. Third quarter kind of flat to maybe 2%, which implies low single digits for the fourth quarter, right? Could you just talk about the sequential step up, which I think implies about a 10% sequential increase in terms of dollars and the confidence level in that fourth quarter bogey? I don't know if I'd use the word bogey, but maybe not the best word. But let's apply it in terms of the dollar growth sequentially in the fourth quarter.

Yeah, so I think in the third quarter guidance, as you mentioned, midpoint is 1% organic growth. In order to get to the full year number, you're penciling in 4% organic growth in the fourth quarter. I think when you look at what's causing that sort of acceleration on the growth rate perspective, it's really driven by diagnostics. So diagnostics is going to go from down low, excuse me, like roughly flattish here in the third quarter, and it's going to move up to, you know, call it mid-single digits in the fourth quarter. And so when you look at that swing, one-third of that is reproductive health, and that reproductive health swing is really driven by our own mixed business as we have the ramp-up of the gel contract. And then two-thirds of it is going to be the immunodiagnostics business. On the immunodiagnostics business, it's really the change in growth rate outside of China. So China in the third quarter, we're assuming down mid-20th. It's the same assumption for the fourth quarter. And when you look at it outside of China, it's really a multi-year comp dynamic. Outside of China, we've been consistently having a low double-digit multi-year stack through the first three quarters of this year. It's the same assumption that's embedded in there in the fourth quarter. It's just a little bit of a year-over-year comp dynamic.

What was the contract that you mentioned that is the other two-thirds of the sequential growth in DX contracts?

In the fourth quarter? Oh, so one-third reproductive health related to the OMICS contract, and then you've got two-thirds as immunodiagnostics. So that OMICS contract is with Genomics England, and it's the next-generation sequencing contract. And so lab went live in July. We've started processing samples, but it will be a sort of gradual ramp-up in the third quarter, and then it should get to sort of full – I would say, capacity in the fourth quarter, which is why you'll see that sequential step up.

So that's a third of the sequential acceleration from flat to mid-singles. Have you quantified the dollar value of that contract on an annual basis?

Yeah, on an annual basis? Yeah, it's about a point of full organic growth on an annual basis.

The margin trend implied for the fourth quarter contract is a big step up from where you've kind of indicated the third quarter would be. A lot of moving parts, tariffs are certainly part of that story, but I think it implies that the fourth quarter margins are maybe up 500 basis points sequentially in 4Q. And with the fourth quarter EPS kind of a little over 30% of the full year contribution, can you just help us understand the drivers that get you there and kind of your level of confidence in that sequential improvement in operating margin?

Yeah, I think I probably have it closer to 400 versus the 500. But anyway, so let's call it the 400. I would say it's not too much different than what our normal sort of seasonality is. You're going to have the higher volume step up in the fourth quarter. And then with those higher volumes, you also get the benefit of the overhead leverage on sort of your fixed cost base. And so, generally speaking, we see a significant swing. It might be a little bit more elevated just with some of the cost actions that we're taking, but I wouldn't say it's too far out of the realm of what I would consider normal seasonality.

How much of that 400 basis point improvement is from OpEx leverage, cost savings, as opposed to gross margin?

Yeah, I would say, look, maybe a better way to say it is if you look at that sort of 400 basis points, I would say maybe 300 to 350 is sort of what I would consider normal seasonality just on a higher volume fourth quarter. You've probably got another 50 to 100 basis points that is more, I would say, discrete cost actions that we're taking. Just the timing of when we'll see the savings is more back-ended to the fourth quarter. Gotcha.

One of the things you mentioned on the last call is that even though you brought down the operating margin guidance for the year to, you know, close to 27%, had been 28 for the year, you talked about the operating margin, an operating margin baseline assumption of 28 entering next year. So the implied margin expansion next year being at or above your LRP target, right? At the same time, as we talked about, you're guiding fourth quarter organic at low single digits. So my question is, what gives you the confidence that 26 operating margins can be 28% plus if we're in an environment where core growth is still, call it, low to mid single digits?

Yeah, look, and this is by no means official guidance on 2026, but I think where we sit here today, if you assume the market is, call it flat to slightly up, 0% to 1%, which is, I think, in line with what some of our peers have mentioned as well, our LRP is based on growing a couple hundred basis points above where market is, so call that putting us in the low single-digit range. At a low single-digit organic growth, it's hard to expand margins. I think if anything, if a company can keep margins flat in a low single-digit growth environment, that's a testament to them running their business. If you take that plus what we've already said on the 28% baseline, if we're growing low single-digit, I would expect our operating margins to be around 28% in 2026. If we have faster growth in low single-digits, then yes, we should be able to expand off the 28% baseline, but Again, given where things are right now and until we get some certainty, the market is still going to be a somewhat challenged market heading into next year. And we'll have to see how the next couple months play out if we get some more certainty on policy and whatnot. But that's kind of what I would say for where we sit today.

So is that 28% baseline assumption, assuming that the 50 bps of tariff impact that you're absorbing this year goes away? What are, I guess, key assumptions that are embedded in that from just a cost or tariff point of view?

Yeah, obviously the 28% includes our assumption on tariffs and the impact to our business. You know, I think when we look at sort of, I would say the three main areas of where we're focusing on driving productivity, one is discreetly in China, just given the headwinds from a volume perspective and the change in policy. You know, I would say second is continuing to drive, I would say, some integration synergies. You know, again, we did, you know, 11 acquisitions in the span of, you know, three or four years. There is still, you know, some work to be done there in terms of creating centralized centers of excellence and driving some costs out there and just some general delaying across the the acquisitions, and then I'd say thirdly is there is some supply chain activities that we're doing to help us drive down the tariff costs, whether that fully embeds a new site in the U.S. from a diagnostics perspective or not, there are still other actions we can be taking to start driving down the tariff headwinds.

And just to be clear, are you assuming that you're able to fully mitigate the tariff impact in 26, or will there still be some net cost that you're absorbing?

Yeah, it won't be fully operationally mitigated. There will still be some net cost impact that we're absorbing.

Okay. In a number of cases, I think investors are kind of extrapolating the implied 4Q organic exit rates for 26. And like we talked about, your guide implies kind of low single digits for the fourth quarter. Are there any puts and takes that... you'd like to kind of leave us with as far as why or why not. That might be a fair base case assumption for organic in 26. Obviously, you won't have the full China immuno DX headwind. Maybe that diminishes. What are some of the other, I guess, factors to think about?

I mean, I think When you, again, actually the math probably is closer to 4% OG for the fourth quarter, I think, in order for us to hit our midpoint of the guidance. So I think that's kind of where consensus is shaking out right now. You know, as I just mentioned, look, I think from where we sit today, I think it's hard to envision a market that's any different than what we're seeing for 0% to 1% right now, and we anticipate to grow a couple hundred basis points off that. Again, not official guidance, but I think where we're sitting today, I think that's how things are potentially shaping up to look like. And I think the puts and takes there I would mention, you know, one, look, software this year is going to grow 20%. You know, I don't know if software is going to be, you know, growing 20%. That's not really a safe assumption to head into starting into a year. So we'll have to see what software looks like. On two, China immunodiagnostics. Look, we're still going to have the first half headwinds. As I mentioned, it's going to take a full calendar year for us to lap and reset the baseline. So those are two things I would say that are going to change year over year. And look at the rest of the business. Reproductive health, I think we'll continue to expect strong performance. We've got the full year of the gel contract. And then two, on the life sciences solution side, I don't see a reason to believe why that's going to change. I think we're going to continue to see at least steady as she goes on the reagent side and some modest growth there. And then on the instrumentation, I think things will kind of continue to be pressured until we get some real sustained, I would say, clarity on the rules of the game.

I do want to touch on free cash flow conversion, which has been much better than it has been historically for the company. I mean, you did 90% free cash flow conversion in the first half of this year. Last year, you did 95%. You're guiding to $500-plus million of free cash flow for the year. Is 90% kind of a sustainable new baseline for the company, and what are your priorities for capital deployment? The buybacks have stepped up a lot in the first half. Should we assume that you're redeploying 100% of that into the repurchase?

Yeah, I think, look, as we look at free cash, and this has been a major focus for us, I think, over the past real two or three years, We have out there sort of a guidance of 85% plus conversion. I think that's our guidance philosophy is trying to put a number out there that we feel confident in our ability to deliver above. And I think we've shown that so far on the free cash flow side. I think it's a trend that we'll continue to see over the next couple of years. It's both a testament to our, I would say, portfolio as Revity, but also to the fact that we've put in, I would say, a lot more operating rigor around our cash flow performance. As you look at capital deployment, to your point, yes, we have stepped up the share buybacks. I think as long as we continue to see, you know, an opportunity to repurchase our shares at what we consider a good return level, I think you're going to continue to see us being aggressively opportunistic from a share repurchase perspective. I think that's, you know, we'll kind of see how the M&A environment and things there shape up. But right now, I think it's hard to argue against our ability to repurchase shares at what we view as a very discounted price.

Great. And lastly, you know, I'd say, what do you think investors are most underappreciating about Revity. I mean the stock kind of trades in line to the low end of the group and so they're like relative multiple. You've done a lot in terms of portfolio changes last couple years, but the environment's not really been accommodating. What do you think investors are most underappreciating?

Yeah, look, it was kind of an unfortunate time, but it was just the reality of the situation. You know, we launched as Revity and then, you know, Pharma really went into a heavy down cycle. One of the worst ones, you know, in the past couple decades and And so from that perspective, I don't think we've really gotten to show investors the power of the Revity portfolio and the ability to really expand margins at a really, I would say, healthy clip once it sort of returns to more normalized levels of spending. And we still believe our margin entitlement over the next several years is mid-30s operating margin. And so we remain excited about our ability to show that to investors. And I think probably the one other underappreciated area outside of just the margin opportunity is really on the software business, which we touched on earlier today.

Great.

We'll have to leave it there. Thanks so much for being here, Max. Yeah, appreciate it. Have a great day.